In 2014, the U.S. House of Representatives approved a new farm bill establishing the Margin Protection Program (MPP) for dairy producers. Assume that the program has effectively created a price floor for milk at $0.18 per pound. Use the following additional information to answer the following questions:Without the price floor, the equilibrium price of milk is $0.15 per pound, and the equilibrium quantity is 200 billion pounds of milk.The supply curve intersects the price axis at $0.05 and the demand curve intersects the price axis at $0.25.At the price floor of $0.18, the quantity supplied is 260 billion, and the quantity demanded is 140 billion.To support the price floor, the USDA buys up the 120 billion pounds of excess milk.i. With the price floor at $0.18 per pound of milk, how much consumer surplus is created? Do not round your answer. ii. With the price floor at $0.18 per pound of milk, how much producer surplus is created? Do not round your answer. iii. With the price floor at $0.18 per pound of milk, how much money does the USDA spend to buy surplus milk? Do not round your answer.

We have given the following information

Answered: n 2014, the U.S. House of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

In 2014, the U.S. House of Representatives approved a new farm bill establishing the Margin Protection Program (MPP) for dairy producers. Assume that the program has effectively created a price floor for milk at $0.18 per pound. Use the following additional information to answer the following questions:

Without the price floor, the equilibrium price of milk is $0.15 per pound, and the equilibrium quantity is 200 billion pounds of milk.
The supply curve intersects the price axis at $0.05 and the demand curve intersects the price axis at $0.25.
At the price floor of $0.18, the quantity supplied is 260 billion, and the quantity demanded is 140 billion.
To support the price floor, the USDA buys up the 120 billion pounds of excess milk.

i. With the price floor at $0.18 per pound of milk, how much consumer surplus is created? Do not round your answer.

ii. With the price floor at $0.18 per pound of milk, how much producer surplus is created? Do not round your answer.

iii. With the price floor at $0.18 per pound of milk, how much money does the USDA spend to buy surplus milk? Do not round your answer.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions